World Bank President Ajay Banga’s recent Pacific tour comes in the wake of a pivotal meeting between major financial institutions and regional banks that focused on the critical issue of correspondent banking in the Pacific. This meeting, held just a couple of months ago, addressed the growing trend of Western banks exiting Pacific markets due to concerns over profitability and regulatory compliance. The outcomes of these discussions were later presented to the economic ministers of Pacific Islands Forum countries, marking a significant step in raising awareness about the gravity of the region’s financial challenges.
During his meetings with leaders from Tonga, Fiji, Nauru, the Marshall Islands, and the Federated States of Micronesia, Banga underscored the urgent need to safeguard the Pacific’s access to the international financial system, which is crucial for maintaining flows of remittances, trade, and aid. His announcement of the World Bank’s US$68 million programme aims to address the immediate threat posed by the withdrawal of Western banks, which have been exiting due to concerns over risk, compliance with anti-money laundering regulations, and low profitability in small island markets.
The programme, which includes US$9 million for each of eight Pacific Island nations, will help establish a service to maintain cross-border transactions if countries lose their last international banking relationships. Banga stressed that without this financial connectivity, vital remittances—accounting for more than 40 per cent of some Pacific nations’ GDP—would be severely impacted, along with tourism, trade, and disaster relief efforts.
The visit also highlighted other pressing issues, including climate resilience and the need for stronger digital financial inclusion. Banga emphasised that while financial assistance was important, long-term solutions would involve building partnerships, enhancing infrastructure, and promoting digital innovation across the Pacific. He urged the region to focus on collective action, noting, “Together you have scale, separately it will be a problem,” and encouraged Pacific nations to work collaboratively to address their shared financial and environmental challenges.
This renewed focus on correspondent banking and financial inclusion comes at a critical time for the Pacific, following significant dialogue between financial institutions, regional banks, and governments. The World Bank’s financial support and Banga’s call for deeper engagement offer hope for creating sustainable economic solutions in the region.
Main Picture: World Bank President Ajay Banga in Fiji. Pic Courtesy: World Bank Pacific.
